Clinton and Obama back China crackdown

Clinton and Obama back China crackdown
By Eoin Callan in Washington
Copyright The Financial Times Limited 2007
Published: July 5 2007 22:02 | Last updated: July 5 2007 22:02


Hillary Clinton and Barack Obama, the frontrunners for the Democratic presidential nomination, have agreed to co-sponsor legislation that would levy punitive duties on Chinese goods to cajole Beijing into revaluing its currency, according to aides.

The endorsement is a sign that trade with China is emerging as a hot political issue in the upcoming election and increases the prospect of the legislation passing with a veto-proof majority, analysts said.

The bipartisan legislation has been spurred by claims that China’s cheap currency makes its exports more attractive and is contributing to the record annual $232.6bn (£115.6bn) US trade deficit with the country.

The early pledge to vote for the bill will strengthen the candidates’ claims to be defending US manufacturers against what they argue is unfair competition.

A critical stance on US trade policy has become increasingly de rigueur for candidates as the Democratic presidential field tilts towards a populist stance on economic issues.

The bill, introduced by Senators Max Baucus, Chuck Grassley, Charles Schumer and Lindsey Graham, would permit US companies to seek anti-dumping duties on Chinese imports based on the undervaluation of the currency and calls for a trade case to be brought by the US at the World Trade Organisation.

Analysts said the sponsorship of the bill by the two leading candidates made it more likely the US would take a more aggressive stance towards Beijing on trade issues if the Democrats took the White House.

The Senators who introduced the legislation set out the case for the move on Thursday in the Financial Times, arguing that “a little pressure can go a long way to encouraging the right policies.” Although the Senators single out China, they say “tomorrow it could be another economy’s currency, with even more devastating effects”.

They said existing international currency policies are out of date and “pose a serious threat to the global trading system by violating the principles of the International Monetary Fund and the WTO”.

Brian Pomper, a former Democratic adviser, said China was becoming a proxy for US political anxiety about globalisation and that sponsorship of the bill was the most combative position yet taken towards Beijing by the two candidates.

Sandra Polaski, a trade analyst at the Carnegie Endowment, said US politicians were making China a scapegoat in the face of widespread economic insecurity among voters. “Opinion polls consistently show the American public has a balanced view of China. It is campaigning politicians who are turning the heat on Beijing,” she said.

In a separate letter sent recently to Hank Paulson, US Treasury secretary, Mr Obama warned that the “administration’s refusal to take strong action against China’s currency manipulation will also make it more difficult to obtain congressional approval” for free trade agreements.

The legislation could be voted on as early as the autumn and has been presented by its advocates as a WTO-compliant version of a more radical bill introduced in the last Congress by Senators Schumer and Graham that would have applied 27.5 per cent tariffs on Chinese goods and violated international trade rules.